Exam 7: Profit Planning

LHU Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 2.5 hours of direct labor at the rate of $15.00 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June. -The company plans to sell 38,000 units of Product WZ in June.The finished goods inventories on June 1 and June 30 are budgeted to be 600 and 100 units,respectively.Budgeted direct labor costs for June would be:

Casper Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 3.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: The company wants to maintain monthly ending inventories of Jurislon equal to 10% of the following month's production needs. On July 31, this requirement was not met since only 6,900 kilograms of Jurislon were on hand. The cost of Jurislon is $3.00 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months. -The total cost of Jurislon to be purchased in August is:

Diltex Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: • Sales are budgeted at $220,000 for November, $200,000 for December, and $210,000 for January. • Collections are expected to be 70% in the month of sale, 27% in the month following the sale, and 3% uncollectible. • The cost of goods sold is 65% of sales. • The company desires to have an ending merchandise inventory at the end of each month equal to 50% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. • Other monthly expenses to be paid in cash are $22,500. • Monthly depreciation is $19,000. • Ignore taxes. -The net income for December would be:

Mitchell Company had the following budgeted sales for the last half of last year: The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled: Collections on credit sales: 60% in month of sale 30% in month following sale 10% in second month following sale -What is the budgeted accounts receivable balance on December 1?

Salge Inc. bases its manufacturing overhead budget on budgeted direct labor- hours. The variable overhead rate is $8.10 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $74,730 per month, which includes depreciation of $20,670. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 5,300 direct labor-hours will be required in September. -The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Enciso Corporation is preparing its cash budget for November.The budgeted beginning cash balance is $31,000.Budgeted cash receipts total $135,000 and budgeted cash disbursements total $141,000.The desired ending cash balance is $50,000.The company can borrow up to $100,000 at any time from a local bank,with interest not due until the following month. Required: Prepare the company's cash budget for November in good form.

The Gomez Company, a merchandising firm, has budgeted its activity for December according to the following information: • Sales at $500,000, all for cash. • Merchandise Inventory on November 30 was $250,000. • The cash balance at December 1 was $20,000. • Selling and administrative expenses are budgeted at $50,000 for December and are paid for in cash. • Budgeted depreciation for December is $30,000. • The planned merchandise inventory on December 31 is $260,000. • The cost of goods sold represents 75% of the selling price. • All purchases are paid for in cash. -The budgeted cash receipts for December are:

Davol Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is $6.80 per direct labor-hour; the budgeted fixed manufacturing overhead is $72,000 per month, of which $20,000 is factory depreciation. -If the budgeted direct labor time for December is 4,000 hours,then the predetermined manufacturing overhead per direct labor-hour for December would be:

Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month.The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales.There are 150,000 finished units in inventory on June 30. Berol Company's production requirement in units of finished product for the three-month period ending September 30 is:

Capati Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.41 direct labor-hours.The direct labor rate is $8.50 per direct labor-hour.The production budget calls for producing 2,300 units in August and 2,200 units in September.The company guarantees its direct labor workers a 40-hour paid work week.With the number of workers currently employed,that means that the company is committed to paying its direct labor work force for at least 960 hours in total each month even if there is not enough work to keep them busy. Required: Construct the direct labor budget for the next two months.

The Yost Company makes and sells a single product, Product A. Each unit of Product A requires 1.2 hours of labor at a labor rate of $8.40 per hour. Yost Company needs to prepare a Direct Labor Budget for the second quarter. -If the budgeted direct labor cost for May is $161,280,then the budgeted production of Product A for May is:

Carpon Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: • Sales are budgeted at $340,000 for November, $350,000 for December, and $370,000 for January. • Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible. • The cost of goods sold is 75% of sales. • The company desires to have an ending merchandise inventory equal to 60% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. • Other monthly expenses to be paid in cash are $21,100. • Monthly depreciation is $19,000. • Ignore taxes. -The accounts receivable balance,net of uncollectible accounts,at the end of December would be:

Planning and control are essentially the same thing.

The manufacturing overhead budget at Cutchin Corporation is based on budgeted direct labor-hours.The direct labor budget indicates that 2,800 direct labor-hours will be required in September.The variable overhead rate is $7.00 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $43,120 per month,which includes depreciation of $3,640.All other fixed manufacturing overhead costs represent current cash flows.The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

The manufacturing overhead budget at Mahapatra Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,900 direct labor-hours will be required in May. The variable overhead rate is $9.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $112,970 per month, which includes depreciation of $18,170. All other fixed manufacturing overhead costs represent current cash flows. -The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Which of the following is not correct regarding the manufacturing overhead budget?

Which of the following represents the normal sequence in which the indicated budgets are prepared?

Balmforth Products, Inc. makes and sells a single product called a Bik. It takes three yards of Material A to make one Bik. Budgeted production of Biks for the next five months is as follows: The company wants to maintain monthly ending inventories of Material A equal to 20% of the following month's production needs. On January 31, this target had not been attained since only 2,000 yards of Material A were on hand. The cost of Material A is $0.80 per yard. The company wants to prepare a Direct Materials Purchases Budget. -The total needs (i.e. ,production requirements plus desired ending inventory)of Material A for the month of May are:

One benefit of budgeting is that it coordinates the activities of the entire organization.

The Gomez Company, a merchandising firm, has budgeted its activity for December according to the following information: • Sales at $500,000, all for cash. • Merchandise Inventory on November 30 was $250,000. • The cash balance at December 1 was $20,000. • Selling and administrative expenses are budgeted at $50,000 for December and are paid for in cash. • Budgeted depreciation for December is $30,000. • The planned merchandise inventory on December 31 is $260,000. • The cost of goods sold represents 75% of the selling price. • All purchases are paid for in cash. -The budgeted net income for December is: